Budget 2024 introduced Section 194T, making certain payments from partnership firms (including LLPs) to partners liable for TDS. Previously, such payments were exempt from TDS, with deductions applicable only to employee payments. This new provision, to effective from 1st April 2025.
Payments Covered Under Section 194T
Section 194T applies to the following payments made by a firm to its partners:
- Salary
- Remuneration
- Commission
- Bonus
- Interest (on capital account, loan account, or any other account)
TDS Rate and Threshold Limit
- Rate: TDS is deducted at 10%.
- Threshold: Deduction applies only if aggregate payments to a partner exceed Rs. 20,000 in a financial year.
Timing of TDS Deduction
TDS under Section 194T is deducted at the earlier of:
- Credit of the payment to the partner’s account in the firm’s books (including capital account).
- Actual payment to the partner.
What is not Covered
- Withdrawal of capital by a partner
- Profit distribution among the partners
in a firm like us where all the branch accounts are consolidated we determine the remuneration based on the revenue of each branch for the in charge partner .normally we compile the date by september and allocate remuneration to each partner.
however it may mentioned that in case we deduct tds on a arbitrary figure and pay tds . it will not match with the final remuneration which is agin a matter of mismatch.
how do we deal with it?
This is a common concern. As per the standard rule related to TDS, deduction should be done either while making payment or providing credit, whichever is earlier. This implies, whenever, on account payments are made to Partner, deduct tax or whenever, the amount is determined and necessary provision is made or balance amount paid, deduct tax accordingly. However, there is may be more to it – please do consult the professional community in this regard.
Unfortunately for me, the “Normal” in the remarks column cannot be selected. The only options offered are “Y” threshold limit or “C” Higher rate. Appears to be a bug in the software or something else unknown to me. Please help urgently to resolve this issue of mine
Appreciate your concern. We are of the same opinion that for Section 194T, the option for the ‘Normal’ transaction (with no value in Remarks) is not being permitted. This section has been introduced with effect from 1st April ’25. The documentation provided by the IT Department along with the FVU Ver. 9.1 (released on 07/05/2025) explicitly does not allow this, which implies that it was mandatory to either place ‘Y’ or ‘C’ when Section 194T was being selected. On regular follow-ups with the department, it has been informed that this has been corrected in the FVU which is scheduled to be released in the 1st week of July. Once this is done, hopefully, this would be resolved and TDSMAN would be updated accordingly.
THANKS FOR SHARING ARTICLE
Normally new tax proposals for the next financial year presented in a Budget will effect form the very next financial year.
Insertion of 194T presented in Budget 2024 will be effective after one year ie, 01.04.2025. That’s why everybody having a confusion about the applicable date of 194T
@Nimai Kumar Banerjee… Though in normaly practice the Remuneration were decided much later on say after about four five months of the end of FY, however in books the entry was being posted on last day of the FY i.e. March 31. Now every firm has to complete books by April 20 or so but before April 30 so that the due TDS on remuneration could be deposited by 30th April. If the TDS is deducted and deposited late causing filing of late return of TDS then it would result into penalty and interest.
From when this section will be applicable. Pl be specific whether it is AY 2025-26 or AY 2026-27.
Early response is solicited.
Section 194T is applicable from FY:2025-26 (AY: 2026-27)
PAYMENT /CREDIT OF PARTNERS’ REMUNERATION GENERALLY CALCULATED & EFFECTED 3-4 MONTHS AFTER THE FINANCIAL YEAR, IT MEANT FOR.
IN THAT CASE ,WHEN & HOW THE SAID TDS WILL BE DEDUCTED AS WELL AS DEPOSITED.
HOW THE SAME CAN BE CONSIDERED AT THE FILING OF IT RETURN FOR THE CONCERNED AY.
The TDS related to March needs to be determined and deposited by 30th April and TDS Returns are to be filed by 31st May. Anything beyond these dates would be treated as violation. Will advise consultation with a tax expert in the regards.